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100 Year History of CNB

Prior to 1887, when the Canandaigua National Bank was incorporated, Canandaigua had been served by 12 banks with varying degrees of success. A few failed; some went out of business when their charters expired; while others went into voluntary liquidation. In 1864, the First National Bank of Canandaigua was formed by M.D. Munger and served the community well for the next 23 years. It had operated on the East side of Main Street until 1882 when it moved to the West side in the location now occupied by a branch of the Chase Lincoln First Bank.

Meanwhile in East Bloomfield, Henry W. Hamlin, who was a prosperous dealer in wool, leather, and other farm produce along with his partner, George Wright, found that he had to carry considerable amounts of cash in connection with his business. It was a long buggy ride to the nearest bank in Canandaigua, especially when the roads were muddy. His neighbors entrusted him with their checks and bank notes, which he customarily carried in the sweat band of this top hat. When the top hat became overloaded, it occurred to him that he should start a bank in East Bloomfield. He had previously been involved in opening a bank in Lima in 1857 and was a stockholder in the First National Bank of Canandaigua. Another motivation in forming a private bank in East Bloomfield seems to have been to provide employment for his son-in-law. Thus, in 1878, Hamlin and Company was started. It later became the Hamlin National Bank of Holcomb.

Encouraged by the success in Bloomfield, Henry W. Hamlin sought out Hiram T. Parmele, a young man who had recently sold a general store in West Bloomfield where he had also loaned money on notes and mortgages, and persuaded him to start a private bank in Victor which was called Parmele, Hamlin and Co. With capital stock of $8,000, it opened for business on March 19, 1883. One of the first employees was William A. Higinbotham, a son-in-law of Mr. Hamlin’s. Four years later, when Mr. Parmele moved to Canandaigua to help start the Bank here, the Victor Bank changed its name to W.A. Higinbotham and Company and later became the State Bank of Victor.

The organization certificate of the Canandaigua National Bank was issued on September 22, 1887. The Capital Stock of $100,000 consisted of 1,000 shares of $100 a share. The original nine directors and the stock subscribed for by them were:

Frank H. Hamlin 135 shares

Hiram T. Parmele 100

Willis H. Tuttle 100

Robert Chapin 50

Marvin A. Wilbur 50

Dr. E. O. Hollister 50

J. Henry Metcalf 35

Thompson Sutherland 20

Dr. Henry Foster 10

These men, together with William H. Higinbotham of Victor who purchased 100 shares, provided about two-thirds of the capital, the other third being sold to 23 other stockholders. On October 22, 1887, at the first Board of Directors meeting, balloting for President of the Bank resulted in three votes for Frank H. Hamlin, son of Henry W. Hamlin, and two for Hiram T. Parmele. The latter graciously moved that the election of Mr. Hamlin be made unanimous and Mr. Parmele was designated Cashier.

On November 2, 1887, the Articles of Association were approved providing for nine directors and for the regular annual meeting of stockholders to be held on the second Tuesday in January. On November 25th, the Comptroller of the Currency authorized the Bank to commence business. Five days later an agreement was ratified to rent the bank property for 10 years from the First National Bank which was going out of business. At this meeting the salary of the cashier, who was to be the active operating officer, was set at $1,500 per year, payable quarterly.

On December 1, 1887 the Bank opened for business. The first depositor listed in the enormous ledger was the Ontario Orphan Asylum of which Frank H. Hamlin was Treasurer. This organization, now known as the Ontario Children’s Home, continues as a customer of the Bank. At the end of the first day’s business, deposits amounted to $35,515. The statement of the Bank showed an investment in 4% Government bonds and as an offset on the liability side, soon appeared an item of $22,500 of circulating notes.

Loans the first day amounted to $2,600. The largest deposit was that of H.P. Ferguson, Cashier of the First National Bank. This was an active account until October 18, 1890, when a zero balance indicates that the liquidation was complete. Other depositors included E.W. Simmons, E.C. Church, Brigham Hall, O.N. Crane, Chapin & Chesebro, Wader and Beecher, J.S. Cooley and Sons, and Miss A. P. Granger, Trustee of Gideon Granger. On the asset side was a large deposit with the National Park Bank of New York City where most of the capital funds had been deposited. This bank was merged with Chase National Bank on July 2, 1888, and under its present name, Chase Manhattan Bank, continues as the principal New York correspondent.

On January 10, 1888, the first regular meeting of the stockholders was held with eight of the original Directors being reelected and Walter Marks of Chapinville elected in place of Dr. Hollister who had died. Nine directors took the oath of office which as continued much the same throughout the 100 years. Following the stockholders meeting, the Directors met, elected the Officers and adjourned, not to meet again until December 29th when a 6% dividend, equal to $6,000, was declared. $700 was transferred to surplus and the remaining profit and loss stood at $39.75. Deposits by this time had increased to $140,000. One year later deposits were up to $192,000 and surplus had grown to $3,000.

At the beginning of 1890, Directors’ fees were set at $5 per meeting attended. In December of that year, the first record appears of one of the problems in banking when three small notes were directed to be charged off. During the early years, a large part of assets were invested in loans, some of which were local and some were readily marketable commercial paper which could be sold in the New York market. At the January 1891 Directors’ meeting, it was voted to pay a salary of $300 to the President, this being the first time he received any remuneration. He was a practicing attorney and devoted only part time to the Bank which was being run by Mr. Parmele as Cashier. The salary of Henry McGlashan was set at $1,000 and that of Henry A. Beeman at $900. By the following year deposits had gown to $328,000 while circulating notes stood at $45,000. The Bank was a profitable operation from the first and paid modest dividends on the stock. This was in spite of the fact that the McKechnie Bank across the street was well established and besides, the brewery, owned or controlled most of the business on Main Street. They were scornful of the ideas that the Parmele-Hamlin combination could compete and boasted that they would run the new bank out of business within a year. In January 1894, Robert Chapin, a grandson of General Israel Chapin and an original director and vice-president, died, and W.A. Higinbotham was elected to succeed him in both offices. The following year Dr. Henry Foster, who headed the Clifton Springs Sanitarium, resigned and was replaced on the Board by Lewis T. Sutherland. In 1897 the banking office was moved to the North Corner of Coy and Main Streets with an annual rental of $600. The Officers were authorized to spend $2,00 to make this new office "safe, suitable and convenient". In the same year, the Comptroller of the Currency indicated criticism of the Board for not having regular meetings since they met only three times a year. On March 23, 1900, the Directors moved "that a telephone connection be put in the banking office".

In 1903 there was a major change in the make-up of the Board with one death and two resignations. George W. Hamlin and Henry M. Parmele, sons of the two founders of the Bank, along with Spencer J. Sutherland, were elected to the Board. On February 1, 1905, George W. Hamlin, who had previously been associated with his father in the practice of law, began employment at the Bank with an annual salary of $1,000. He was also the son-in-law of Mr. Parmele, the active manager of the Bank, having married his daughter, Mary I. Parmele, in September of 1902. In 1906 he was given permission to have the front office wired for electricity. In the latter part of 1907, there was a general money panic sweeping the country. At the October meeting of the Board it was voted "to keep on hand in the vault $10,000 cash over the required reserve until the danger of panic appeared to be past". Two weeks later the difficulty of obtaining currency, the constant drain on the supply, and the feeling of anxiety among depositors that they might not be able to get currency was discussed. On November 27th it was reported that $31,000 of new currency had arrived. As a result of the Panic of 1907, the Federal Reserve System was later established. By 1908 things were going well enough so that for the first time a salary bonus of 5% was declared and the Directors’ fees were raised to $10.

In the fall of 1902, Frank H. Hamlin, together with some of his acquaintances in Rochester, decided to organize a new bank, known as The Genesee Valley Trust Company. He agreed to become Vice President and Manager conditional on his maintaining his residence in Canandaigua and spending only four days a week in Rochester. He commuted on the Rochester and Eastern trolley. In January of 1906 the Minutes of the Canandaigua National Bank showed that he offered to withdraw as President and as Director if it was thought that his connection with the Genesee Valley Trust Company would be detrimental to the interests of the Canandaigua Bank. Evidently his associates thought there would be no conflict and he was reelected as President. In 1908 he was made President of the Rochester Bank and served in that office until February 1914. For six years he was in the highly unusual position of being President of two banks at the same time.

While he was thus fully occupied, the Lisk Manufacturing Co., Canandaigua’s largest employer, was forced into bankruptcy, which came as a great surprise to the local community. It was wrecked by its managers who had speculated with company funds in areas having nothing to do with its regular business. In December 1907, Frank H. Hamlin was named as one of the receivers by the Bankruptcy Court and spent the next 14 months reorganizing this company and restoring it to solvency.

Advertisements appearing in the local papers in 1911 showed that, after being in business 23 years, the Bank’s total resources were $1,300,000 and capital funds had doubled to $205,000. The Bank claimed to be the largest in Ontario County; somewhere along the line it had passed in size the older McKechnie Bank which had now become the County National Bank. September of that year brought the death of Hiram Parmele who had been the active head of the bank for nearly 20 years and later served in the less active role of Chairman of the Board. He was succeeded on the Board by Henry Beeman.

In January 1914, a resolution was passed approving the Bank’s joining the Federal Reserve System which was being organized at the time. A month later, the Board authorized the purchase of two store buildings which now comprise part of the Main Office structure and employed Rochester architect, Leon Stern, to prepare plans for remodeling the building. That he did a superior job is evidenced by the fact that the general appearance of the exterior and the treatment of the main lobby have remained much the same in spite of many changes and expansions during the ensuing 70 years. The Bank moved from its rented quarters on the corner of Coy Street to its own building at 72 South Main Street on November 7, 1914, occupying half of the ground floor with the other half being rented as a jewelry store. The second floor was used for offices while the third floor was residential. In January 1915, Miss Elizabeth Bagley, who was hired as a secretary, became the first woman employee. Three years later Miss Bernadine Farrell started as a bookkeeper at $10 per week, beginning a career that lasted 48 years.

In the war year of 1917, the Bank experienced substantial withdrawals of deposits, the funds going into Liberty Loan government bonds being sold on a basis of patriotic duty. It was found necessary to borrow from the Federal Reserve Bank and to discount some commercial paper to cover these withdrawals. In the same year the Ontario County Trust Company succeeded the Ontario National Bank and raised the interest rate on time deposits to 4%. The National Bank decided to meet this competition. On October 2nd, the management of the Bank was advised by the "lower" bank that it would be open for business Saturday evenings from 7 to 9 P.M. Concerned with this competitive threat, it was determined to remain open Saturday afternoons, but not in the evening. Two weeks later a formal request signed by all employees was presented to the Board asking for an advance in salary of one-third and that the Bank close at noon on Saturdays. Consideration of this matter was tabled until January, by which time the second Vice President was to make a thorough study of salaries, hours and working conditions at other institutions. At the December meeting a 10% bonus was declared, but no further mention of salaries and hours appears in the Minutes.

The Bank applied for and received trust powers in 1919. The next year the first posting machine was purchased. In 1922 a burglar alarm system was first discussed but was not installed until 1924. The surplus account was increased to $150,000 which, together with the original capital of $100,000, now made it possible to lend up to $25,000 to one borrower. The Bank then had 16 employees. With the death of Frank H. Hamlin in February 1926, after almost 40 years as President, there was a general change of officers with George W. Hamlin becoming President; W. A. Higinbotham, Chairman of the Board; Henry Beeman, Vice President; and Acey Sutherland, Cashier. Henry W. Hamlin, an attorney, succeeded his father as a Director. Jack Rice was hired at $75 a month, and Margaret Durand’s salary was increased "owing to her assuming responsibility for mortgage loans and other work formerly done by Mr. McGlashan".

Minutes of board meetings during these years were mainly concerned with the purchase and sales of bonds which were the principal source of earnings. Bonds represented about two-thirds of total assets. Acey Sutherland was elected to the Board to succeed his father. In January of 1927, because of the growth in the trust business, a stock dividend of 150% was declared, Miss Antoinette P. Granger acted as proxy at this meeting. The stockholders who received the additional shares were asked to sell 20% of their holdings at $240 per share to local investors. The stock was paying a $12 annual dividend which provided a 5% return. Six years later, as a result of the Great Depression, no dividend whatsoever was paid for two years and the stock declined substantially in price.

In 1928 there was some difference of opinion among the directors as to the bond policy, one director recommending that the Bank borrow against its government bonds in order to buy additional corporate bonds. In the light of subsequent events, it was fortunate that the Bank pursued the more conservative course. In April of 1929, Basil T. Elmer was made Assistant Cashier. The dividend had now been increased to $14 per share. The Minutes in the Fall of 1929 make no reference to the stock market crash, and as late as October 1930, it was mentioned that there was some appreciation in the bond list. John R. Tyler’s name first appears in the Minutes as follows: "It is believed it would be advantageous to the Bank to have an employee a member of the Exchange Club. It was voted to pay John Tyler’s fees and charge the same to advertising".

The first signs of the difficult times brought on by the Great Depression showed up in what must have been a stormy meeting on January 3, 1931, with a national bank examiner’s demand to charge off all depreciation on all bonds selling below 85. This would have been a substantial amount. After a trip to Washington to consult with higher authorities, President Hamlin agreed on a policy under which only bonds actually in default would be charged off, the amount of this charge being $26,000.

On October 6, 1931, the Minutes record that the Ontario County Trust Company would not open for business on that day. Having suspected that the "lower" bank might be in trouble because of security speculation in the booming twenties, George Hamlin was alerted to the possibility of a run on the National Bank should there be a general loss of confidence if the other bank in town closed. He had taken the precaution of going to New York City to arrange financing with the Federal Reserve should this prove necessary. He traveled to New York on the Lehigh Valley Railroad from Clifton Springs rather than on the New York Central from Canandaigua so that the local people would not be aware that he was leaving town in that excitable and rumor-filled environment. A run did develop on Tuesday, October 6th. In the ensuing excitement, Charles Sackett, a Director, dropped dead of a heart attack. Tellers were instructed to count out cash with deliberation to the nervous depositors who were crowding the lobby. During mid-morning an armored truck arrived from Rochester with additional cash which was stacked in the tellers’ cage in plain view. At the height of the excitement, with lines of people extending well out into the street wishing to withdraw their savings, Clarence Keehn, President of Lisk Mfg. Co., worked his way up one of lines with check in hand. Someone said "Hey, Clarence, think they’ll have enough left to cover you?" Mr. Keehn replied in a voice loud enough to be heard all over the lobby, "I am not making a withdrawal. I am making a deposit of $45,000 and I shall make another larger one tomorrow." Frank Hamlin and John Tyler, escorted by a police officer, went to the post office and received a currency shipment from the Federal Reserve in New York of $600,000. This, together with another shipment from the Buffalo Federal Reserve, was also piled up in the teller’s cage where all could see that plenty of currency was on hand to take care of everyone. It amounted to one million dollars. Some people came in the crowded lobby just to see what a million dollars looked like. As the week progressed and depositors were reassured, many who had withdrawn money and did not know what to do with it, brought it back. Within three weeks the loss of deposits was fully recovered. During the next few months it was necessary for the Bank to take care of all the business in the community, and many of the other bank’s customers appeared on the books as borrowers. George Wade, who had worked for the Trust Company, was hired in November to help take care of this additional workload.

In the Spring of 1932 there were charge offs on the bond list aggregating $108,000, an amount in excess of 10% of total capital funds. The rate of interest on time deposits was reduced from 4% to 3-1/2%, and the dividend to stockholders was cut to a $10 annual rate. In December the usual Christmas bonus was omitted. A detailed account of each day’s happening during the Bank holiday, from March 4th to the 15th, 1933, showed that President Roosevelt made a radio broadcast stating that only banks in "apple pie" condition would be allowed to open. On the 15th The Trust Company’s good news had come at 3 A.M. but none for the National Bank. Everyone wanted to know why. It was a cold gray March day inside and out. Mr. Hamlin called Federal Reserve in New York and was told no word had come from Washington. At 8:08 P.M. the license to open that morning was received by Western Union. This information, although 12 hours late, was gratefully received.

In June of 1933, the Board decided to employ Smith and Hall, Investment Counselors, of Rochester to provide supervisory service for the bond account. In that month the dividend was passed, and the salaries of the President and Cashier were reduced. Having suffered through some difficult times with the examiners and with the Bank operating at a loss, George Hamlin decided that no one in his right mind would want to be a Bank officer or a Bank director. As a result, he directed his son, Arthur S. Hamlin, who had just graduated from Yale, away from banking and arranged a job for him at Smith and Hall, where he presumably would learn something about bond and stock investing. In September of that year, another $72,000 was charged off on the bond account. Although most of the Bank’s bond portfolio was of good quality, the bond market at that time was so severely depressed that the market value of the bond list was substantially below book value. Interest on time deposits was cut from 3-1/2% to 3%.

The following year, $300,000 of additional capital for the Bank was provided through the sale of preferred stock to the Reconstruction Finance Corporation which was engaged in bolstering the capital positions of banks throughout the country. Personal assets of some of the directors of the Bank were pledged to secure part of this advance. During the worst of the depression years the Bank continued to have good operating income but, because of large charge offs on bonds, had net losses in 1931, 1932 and 1933. No dividends were paid in 1933 and 1934. By the end of 1935, conditions had so improved that dividends were resumed. Thus, in the whole 100 year history, there were only two years in which dividends were not paid.

According to published statements of those difficult years, the Bank’s capital funds declined $89,000 and total deposits about a half million. By 1936 the problems were over. The market value of the bond account had fully recovered to more than book value; deposit growth had resumed, and the Bank was again showing substantial earnings. All of the R.F.C. preferred stock was paid off in subsequent years. As a result of having come through the depression so well, the Bank found itself in a favorable competitive situation with a steady gain in earnings and deposits. Total resources grew from the $5,000,000 level to about $11,000,000 by the end of 1947.

In a period of declining interest rates and unsatisfactory earnings of banks, generally the Federal Reserve Bank in the late thirties adopted so-called Regulation Q, which set a top rate on what banks could pay on savings and other time accounts. This rate was reduced from 3% to 2-1/2% and then to 2%. At the same time the yield available on high grade corporate bonds dropped from 4-1/2% to 3%. By 1939 Regulation Q required that savings account rates be cut again to 1-1/2%. During this period, the advisory work of Smith and Hall was concerned with bond accounts of country banks in western New York State. At the end of 1940, Henry Parmele, who had run the Hamlin National Bank for many years, died. Fred Hamlin, who was Cashier, did not really want to assume responsibility. His son, John T. Hamlin, who had worked for the Bank about 10 years, was named President at the stockholders meeting in January 1941. He had a good understanding of good and bad credit risks in the community. Arthur Hamlin became a member of the Board of Directors to handle the bond investments. This step was taken without any encouragement from his father who still thought no one would want to be a bank Director. The total resources of the Holcomb Bank were $750,000, and it was barely breaking even as to earnings. In subsequent years, the Bank made slow, but steady progress in both size and net income.

As 1941 progressed and George Hamlin discussed banking problems with his son, he gradually changed his view, and perhaps because of his own approach to his 70th birthday, he thought that it might be well for Arthur to join the Board of Canandaigua National Bank so that the family interest would be represented by a younger member. Thus, in January 1942, the Board was increased from nine to ten members. Arthur Hamlin was elected, marking his first formal association with the Bank. 1942 was a remarkable year in that the United States had just become a participant in World War II. Interest rates were declining and the cost of living was going up, making it necessary to grant a 7% increase in pay for all employees. The average yield on the entire bond portfolio was down to 2.94%. The going rate for short-term commercial paper was from 5/8 to 3/4 of one percent. Up to this time, neither local bank had service charges on checking accounts, but they were being adopted by many banks around the country. John Tyler conferred with John Hamilton, President of the "lower" bank, and they agreed on a set of service charges which would be uniform for both banks. As the war progressed there was little room for private business; local lending diminished and was replaced largely by investment in Government bonds at low rates. In July of that year, John Tyler enlisted in the Navy, and it was feared that a number of other young men would be drafted, leaving the bank in a difficult position. Somehow this was worked out with a draft board so that the bank was able to struggle along.

At the end of the War in 1945, when John Tyler returned from service in the Pacific, total assets were about 10-1/2 million, of which 8 million was invested in Government bonds and only $350,000 in local loans and mortgages. One of his first duties was to study into the G.I. mortgage which was a new development; this was of interest to the Bank because of the low level of loans and the attractive 4% interest rate compared with 2% on U.S. Treasuries. His efforts were successful. By the middle of 1947, the Bank had 58 G.I. mortgages on the books, representing more than half of the mortgage portfolio.

The year 1946 marked the culmination of the longest bull market in bonds in history with interest rates reaching record lows. Long term bonds yielded 2-1/2% while interest on savings accounts was limited to 1%. This was followed by a 36-year bear market in bonds causing all kinds of trouble for banks, especially thrift institutions which loaned money out on long terms. At the Canandaigua National Bank, this problem was avoided by a firm policy of limiting maturities on municipal and corporate bonds to no more than 15 years and to lending on mortgages with a 15-year amortization schedule. Government bonds were limited to 10 years. Hence, the older low-rate items ran off as interest rates gradually increased, making it possible to reinvest the maturing funds at higher rates.

On November 11, 1947, Armistice Day and a Bank holiday, George Hamlin did not go to the Bank but lay down to take a short nap prior to going to the Kiwanis Club luncheon to hear a talk by Congressman John Taber. He died peacefully in his sleep. The Bank was well served by two experienced loan officers, Basil Elmer and John Tyler, but was suddenly bereft of its investment officer. After several meetings, the Board of Directors decided to choose Arthur S. Hamlin as the new President to succeed his father. Frank H. Hamlin was appointed to fill his father’s unexpired term on the Board. Although Arthur Hamlin had no direct experience in banking, other than serving on two bank boards, he had devoted 14 years at Smith and Hall learning about investments. A good deal of his time had been spent working on the bond accounts of country banks. After his election he went to New York City to get the latest thinking on the bond market. There he was assured that the Federal Reserve could be counted on to maintain a 2-1/2% rate on long treasuries and that he might as well invest long to get the better yield. Karl Smith advised against this action on the simple ground that 1% was not a fair return on savings, and, that somewhere along the line, the Bank would have to pay more. This was not the generally accepted view on Wall Street, but fortunately the Bank adhered to his advice.

Arthur Hamlin, having wound up his work at Smith and Hall, began active employment at the Bank on January 8, 1948, with an annual salary of $6,500. His very first decision, at the urgent request of the tellers, was to get rid of the handgun that had been kept under the teller’s counter for years to shoot armed robbers. Next it was decided to go on a five-day week, eliminating Saturday hours, a trend that was common at that time. This was well accepted by employees. Shortly he was advised by Raymond Ball, President of Lincoln Rochester Trust Company, that they were about to buy the Ontario County Trust Company, thus changing the local competitive situation. This purchase was the result of Lincoln’s failure to buy the Canandaigua National Bank which had indicated that it wished to remain independent under local control, along with the decision of John Hamilton, just then, to leave Canandaigua for a better opportunity with a larger bank in Jamestown.

During that year, a profit sharing and retirement plan was established since there was no pension plan to protect the employees, some of whom had been with the Bank many years. This plan, copied after an earlier one set up by the Papec Machine Company of which the Bank was trustee, has proved highly successful providing many retirees a generous supplement to Social Security. As the Bank entered the decade of the 1950’s, earnings were improved by a larger investment in local loans and less dependency on low-yielding government bonds. There was an effort by some in the industry to hold the line at 1% on savings deposits to help Bank earnings, but the board felt that the depositors were entitled to a better return and raised the rate to 1-1/2% in 1951 and to 2% in 1953. Because of the Bank’s heavy dependence on savings deposits, it found that every time the rate was increased by 1/2%, it took two years to turn over enough maturing bonds and mortgages to offset the cost with better gross earnings.

On the national scene, a major change in policy on interest rates took place in March 1951 when the Federal Reserve reached an "accord" with the Treasuring Department that it would no longer support long-term government 2-1/2% bonds at par. This change was not generally expected by Wall Street, and shortly resulted in a bear market in bonds that lasted for many years. This gave the bank a better opportunity to employ new funds, but also resulted in a substantial loss in the market value of the existing bond account. Fortunately, the adherence to relatively short maturities left it in better shape than many banks.

As time went on, two trends in banking in New York State became evident. One was the increasing competition for interest accounts, which had been shunned by the bigger banks in earlier years and the other was the gobbling up of many country banks by the large city banks. It was then expressed widely that little banks could not compete, could not develop successor management, nor provide a proper market for their stock. As it turned out, none of these things proved true. Independent banks around the State, like Canandaigua National, did much better on earnings and dividends, had less trouble developing successor management and the market value of their stocks did better than that of many of the big banks which tended to decline during those years. The Canandaigua National Bank was approached informally by several New York banks, but their overtures were rejected. Had it been decided to sell out at that time, it would have been most unfortunate for the stockholders.

1957 was a milestone year in several respects. First, John Hamlin was elected to the Board of Directors in January. Deposits, having grown to about $14 million in capital funds to 1-1/2 million, it was voted to split the Bank stock two for one, the last split having been back in 1927. There was concern that the Victor bank might succumb to the blandishments of some Rochester bank. George Higinbotham, who ran the Bank in Victor, was a member of the Canandaigua Board. He was agreeable to joining the two banks. His only stipulation was that his right-hand man, Eldred Sale, should have an opportunity for advancement in the merged bank. This proved to be no problem as Eldred Sale had become a Senior Vice President, a Director, and had run the Victor office most efficiently. The merger became effective on November 14, 1957, when one share of the newly-split Canandaigua bank stock plus $25 cash was exchanged for each share of the stock of the State Bank of Victor. Total assets of the merged Bank now amounted to $17 million.

The next year was one of transition. It became necessary to get accustomed to having a branch office and to coordinate its bookkeeping with that of the main office. The size of the Victor office was doubled by taking over the space formerly occupied by the local library. At the beginning of 1959, the rate on savings accounts was again raised from 2-1/2% to 3%, having an adverse effect on earnings of that year. The installation of the more advanced electronic and mechanical bookkeeping machines, National Cash Register Postronics, was undertaken. The machines served the bank well for almost 20 years until they became obsolete and were phased out in favor of the entirely electronic computer equipment now in use. After 65 years of association with the Bank, Acey W. Sutherland retired as Chairman of the Board at the end of 1959. This was followed by the retirement of Basil T. Elmer and Margaret J. Durand as officers after long years of effective service.

As the Bank’s business continued to grow, it was decided to expand the Main Office by taking over the space on the ground floor occupied by DeGraff’s Book Store. This major expansion was completed in December 1961. Federal Reserve Regulation Q was again increased so that the Bank went from 3% to 3-1/2% and a year later to 4%. This rapid increase in the cost of carrying the savings accounts resulted in lower earnings for 1963 and no growth from the income of five years earlier.

Having taken some part in various activities of the New York State Bankers Association, Arthur Hamlin was rewarded by being elected treasurer of that organization for a one-year term, during which the Bank enjoyed a rather large deposit of the association. In May of 1963 he was appointed a Director of the Buffalo Branch of the Federal Reserve Bank of New York, where he served for five years. Following the resignation of Acey Sutherland, George Higinbotham became Chairman of the Board and served until his death in December 1965. The following January, Eldred Sale was elected a member of the Board and Frank Hamlin became Chairman continuing in that capacity for the next 20 years, eventhough his principal engagement was that of President of the Papec Machine Company of Shortsville, a manufacturer of farm equipment.

In the late 60’s, with the continued growth in deposits, it became evident that more space was needed. The purchase of Samuel Levy’s law office building at 9 Chapin Street was negotiated. In the light of subsequent events, this step proved fortunate. For some time the establishment of an office in Honeoye had been under consideration, but it was not felt that there was sufficient business there to justify a branch. However, by joining forces with the Hamlin National Bank of Holcomb, it was believed that a successful branch could be developed. Hamlin National was growing rapidly in loans and could use additional capital which would be provided by the merger. In October 1967 at a stockholders meeting it was voted to split the stock 2-1/2 for 1 and to approve the merger with Hamlin National. After the split, the stocks of the two banks were equal in book value and earnings so that a share-for-share exchange was deemed equitable. The merger was made effective in November and resulted in a bank with 33 million in deposits and 3 million in capital funds. When the Comptroller of the Currency approved the merger, he also gave his blessing to opening a branch office in Honeoye. This was accomplished in February 1968 in rented quarters in a store. John Higinbotham has served as Manager of this office from the start. The following year a permanent building was constructed in Honeoye. At about the same time, the investment advisory service of Karl Smith was purchased adding a new dimension to the Trust Department.

In November 1969, Arthur Hamlin was surprised to learn that he had been nominated to serve on the Board of Directors of the Federal Reserve Bank of New York. He was duly elected to represent the smaller banks in the district and served a three-year term from January of 1970 through the end of 1972. He found the twice-monthly meetings in New York City to be most rewarding and educational and greatly enjoyed the many friends he made in the Federal Reserve System.

One of the great competitive disadvantages of the Bank during those years was the lack of a drive-in facility as the Main Office was hemmed in at the rear by the Playhouse Theatre. This enterprise, which had been losing money for years, had been sold by the Schine chain to a real estate conglomerate, called Realty Equities, which was in shaky financial condition. The theatre, along with 50 others, was mortgaged to an insurance company in Texas. When in New York for the Fed Directors’ meetings, Arthur Hamlin frequently called on the real estate firm’s office in the theatre district. Finally, in 1972, he was able to complete the purchase, and the theatre was torn down. During most of 1973 the Bank was in a general state of confusion while the building of the new addition between the old main office and the annex progressed. By early 1974 the customers could enjoy the new drive-in facility and the President of the Bank, for the first time, had the luxury of a private office.

1975 was a year of chaotic conditions in the municipal bond market, when New York City could not meet its obligations and was unable to borrow in the market. While the management of the Bank had long considered the City a doubtful credit risk and the Bank owned none of its bonds or notes, there was concern since it did have a substantial investment in New York State obligations, those of its agencies and upstate school districts. Because of the shaken confidence, many of these sound investments were thrown on the market and sold in the fifties and sixties to yield 10% or 11% tax exempt. The annual report of the Bank for that year stated "We are confident that the present problems will be resolved with the result that all of these obligations will be paid at maturity and the Bank will sustain no loss". Happily this turned out to be the case.

After a period of extensive study, the construction of the new Victor Office was undertaken, and it was opened on June 5, 1976. It was found to be much simpler to build a whole new building than to keep patching on to an old one as was the case in Canandaigua. On November 1st of that year the Bank stock was again split 2-1/2 for 1, making a total of 40,000 shares outstanding owned by some 350 stockholders. One share of stock issued at the organization of the Bank in 1887 had now become 31-1/4 shares. Deposits had grown to 63 million.

As time went on such long-standing and dedicated officers as John Hamlin, John Tyler and George Wade, who had contributed so much to progress of the Bank, began retiring in rapid succession. Continuing on were Robert J. Craugh and Robert C. Craven, both of whom had started with the Bank in 1947 after service with the Marines. Bob Craugh was in charge of operations, seeing the Bank through the many changes involved in adding branches, in tax law and the rapid evolution of banking practices generally. Bucky Craven handled many of the Bank’s loans as well as acting as Personnel Officer.

As 1977 progressed it became increasingly clear that the Bank would need to look for new leadership to cope with the proliferation of new government regulations and red tape as well as with escalating inflation and accompanying higher interest rates, all making it difficult for management to keep pace with the rapidly changing scene.

During the holiday season at the end of 1977, an effort was made to persuade George W. Hamlin, IV (son of Frank H. Hamlin) to give up the practice of law and to join the Bank as a Vice President. This he did on March 6, 1978. He was graduated from Yale University in 1963 with a B.S. Degree (Physics) and then performed distinguished service as a fighter-pilot in an Air Force F-105 accumulating 100 combat missions over North Vietnam for which he received the Distinguished Flying Cross (DFC) among other decorations. He received his Juris Doctor degree thereafter from the University of Virginia Law School and for six years, was associated law with the law firm of Nixon, Hargrave, Devans and Doyle in Rochester. There, he engaged in a general practice while specializing in tax, financial planning and trusts and estates law. On April 1st of the following year, he became President of the Bank upon the retirement of Arthur Hamlin, who had served 31 years. Total resources of the Bank were then $85 million, having grown more stewardship which saw the Bank’s expansion from one to four offices.

The year of 1979 proved to be one of rapid change fueled by runaway inflation which reached 13% and by much higher interest rates which were not to reach their first peak at 20% until the beginning of the following year. A 5% cost of living increase in salaries for all employees was voted by the Board effective July 1st. With Bank interest rates payable on deposits capped by government regulation much money was drained from the banking system into newly created money market investment funds. Residential mortgaging had all but dried up. In the minutes of the September Board meeting "a complete moratorium (with respect to mortgaging) was considered contrary to our general policy which was to continue to serve the legitimate credit needs of our communities even in times of distress." The market prime rate was changing so frequently that a special committee of senior officers was formed in order to provide the appropriate authority to adjust the principal lending rates of the Bank between meetings.

On October 6, 1979 the Federal Reserve in a historic move raised the Discount Rate an unprecedented one percentage point to 12%. This signaled the beginning of the Fed’s assault upon inflation which was to continue for several years. From that point forward Fed policy would place strict limitations upon the growth of the money supply with the result that the Prime lending rate for short term borrowings of large corporations of good credit would reach an ultimate high of 21-1/2% by the close of 1980. Throughout much of this time, yield curves were inverted with short term rates far higher than long term rates. The Bank as a matter of policy limited its Prime lending and mortgage rates to spreads of 2% or more below market in order to finance their businesses and homes in an adverse environment characterized by runaway inflation.

New deposit instruments had been created. The six month money market certificate of deposit was introduced a year earlier followed by the two and one-half year certificate and the initiation of an interest bearing checking account for individuals known as a "NOW Account". With the Prime Rate climbing through 15%, a crisis was developing at the close of 1979 in the international money markets caused by an acute weakness in the U.S. dollar. That the United States was now a part of a world economy in which it could only negotiate rather than dominate was all too clear. The seeds of inflation planted during the middle sixties by implementation of President Johnson’s "Great Society" at the same time as the escalation of our involvement in the Vietnam War had now burgeoned out of control requiring severe measures and difficult adjustments. Growth and loan demand continued during this period despite the storm clouds of severe recession building on the horizon.

As if the challenges of the shaky economy and the initial stages of deposit deregulation were not enough, it was clear that the Bank’s bookkeeping equipment would need to undergo a complete change in order to service the rush of new business. George Hamlin and David Morrow went to Dayton, Ohio to study the latest NCR equipment. It was voted later in the year to make a major investment in a mainframe computer system. When it was delivered, it was located in a specially designed room in the basement of the Main Office. Gradually over the next fours years, David along with others would convert to the computer the record keeping and operations of the branches and various departments of the Bank and would consolidate them at the Main Office. In return, there would be the proliferation of electronic information screens known as "CRT’s" in each office and on each desk. With careful planning, this major development was accomplished with few hitches and little inconvenience to customers. It was to position the Bank suitably for its entry into the electronic era of banking in which a growing number of transactions would be initiated and received by means of electronic data links established through telephone lines.

By 1980, the Bank had need to expand its physical space to accommodate the external growth of its market and the internal growth of its operations. Happily the building directly north of the Bank was acquired earlier from an estate for then yet unspecified expansion purposes. The site was subject to a long term lease held by Dick Anthony, Ltd., a men’s clothing establishment. As it happened Stephen Hamlin (son of Arthur Hamlin and a Director since 1973) owned the building on the corner just on the other side of the clothing store. This building had long been the site of The Goodie Shoppe, though it was originally known as the Draper Building, and at that time it happened to be vacant and in need of renovation. It was determined that a joint effort would be feasible which would combine the Bank’s main building, current annex and newly acquired property with that of the Draper Building to form a four building complex. This combination would feature a historic renovation of three of the buildings in conjunction with utilizing newly constructed common corridors, fire staircases and an elevator to be located in the new structure in the center of the complex. After much discussion and evaluation by means of touring a number of historical rehabilitated sites throughout the state, the architecture firm of Mendel, Messick, Cohen and Waite of Albany was engaged. Jack Waite, along with George Hamlin and Stephen Hamlin traveled to Washington to speak with representatives of the Department of the Interior with respect to having the renovation plans certified under the provisions of the Historical Rehabilitation Act. The Act provided for very attractive tax benefits for certified projects. A contract was entered into with Frank J. Marianacci, Inc. of Holcomb to carry out this highly specialized rehabilitation work. The Marianacci company had been involved with the first "tax act" restoration in the United States with the restoration of the Sibley House located on East Avenue in Rochester which was then occupied as the headquarters of Schlegal Corporation.

The entire project, however, depended upon the relocation of the men’s clothier to other quarters. After some effort, Robert Sheridan was able to find suitable quarters for the clothing store further down Main Street. The favorable lease was given up in return for a partial subsidy of the new rental payments for a period of time. In an effort further to economize on the costs associated with such a move, one bright, crisp November Saturday morning a dozen or so officers and employees of the Bank gathered and transported most of the inventory and fixtures of the store to the new location. Richard Hawks backed the rent-a-truck loaded with inventory and fixtures right over the curbing and onto the sidewalk coming to rest in front of the new location. In a few hours the move was complete, much to the satisfaction of all.

Construction was able to commence then with the demolition of the existing building which was to be replaced with a modern structure having a facade duplicating a structure, circa 1880, which formerly stood on the site. The new building would contain the modern amenities for the adjoining three historical structures.

About the same time, a new supermarket building was to be constructed by Wegman Markets, Inc. which was to be eight times the size of its store located there at the foot of Main Street. We were invited to establish a branch office within its confines. A full service branch at the Lakeshore Office was opened on May 11, 1981. The advent of this new facility within the City of Canandaigua would assist in bearing some of the burden of servicing our customers during our historical renovation project which would involve ultimately the banking hall and other spaces used for the day-to-day operation of the Bank.

On the national scene during this time, the Depository Institutions Deregulation and Monitary Control Act of 1980 became effective which prescribed the elimination of all interest rate ceilings existent since 1930. Deregulation was to combat the disintermediation of funds from the banking system by permitting banks to pay market rates for their deposits. Even though interest rates subsided somewhat during the latter part of the year, they rose to historical highs at the beginning of 1981 when the city Prime reached 21-1/2%. As a matter of internal policy we had maintained our Prime Rate of 18%. Unfortunately, the high rates continued most of the year pushing the economy into recession which was to be the most severe experienced since the Great Depression.

Despite a mortgage environment where rates were ranging between 16% and 18%, the Town of Farmington continued to manifest strong growth. There being no central commercial area, it was difficult to know where to place a banking facility. The Wade’s Food Markets had served the area for many years and was planning a significant expansion of their business adjacent to their present site. It developed that it would be in our mutual best interest to establish a new banking facility connected with the new store. The Farmington office was opened December 7, 1982 with John VanVechten in charge. The facility proved to be successful to the point that a few years later plans were again underway to expand both the grocery store and the bank.

On December 16, 1982 the Honeoye office was robbed at gunpoint just as the bank was closing. The robbers wore ski masks and carried shotguns. They forced the employees and customers to lie face down on the floor while they gathered up more than $30,000 and escaped by means of a trail motorbike across back lots to the main road. Within minutes Sheriff Gary Stewart of the Ontario County Sheriffs Department and representatives of the FBI and the New York State Police were on the scene. Interviews were taken, roadblocks were set up and dog teams dispatched. At 3:00 a.m. the following morning Sheriff Stewart called George Hamlin out of a sound sleep at home to say that the two suspects were surrounded in an abandoned cabin nestled in the Bristol hills where they had taken shelter. A light snow had dusted the area making it difficult to follow tracks. The general direction of flight was determined and through skillful police work the suspects were tracked down. Within 24 hours of the crime, the suspects had been arraigned and placed behind bars. As it turns out they were local men who had just returned home having served time in another state. They were tried, convicted and returned to prison after a celebrated trial in which one of the accused represented himself fancying himself somewhat a jailhouse lawyer.

A distinctive feature of the new branches at Lakeshore and at Farmington was the installation of automatic teller machines known as ATM’s. By the use of plastic cards the machines would offer routine banking services to include deposits and withdrawals, utility and loan payments and the like, 24 hours a day, 7 days a week. The Bank was the first institution in our market area to install and operate these machines and their popularity in those locations grew by leaps and bounds. It was noted from the start that the machines would gather more funds in the form of deposits than they would distribute in cash by at least a ratio of 2-to-1. Their deposit gathering capacity was, therefore, well established when in the summer of 1983 a new ATM appeared at the Wegman’s store not fifteen feet from the Bank’s own ATM. The new machine was owned by the store and was operated by data processing offered through Marine Midland Bank. Moreover, that machine was used by Marine and others for the convenience of their depositors. Our Bank commenced a lawsuit in affiliation with the Independent Bankers Association of New York State (IBANYS) against Marine Midland Bank, N.A. and Wegmans Food Markets, Inc. On the grounds that the ATM represented the operation of a branch in contravention of state and federal statutes prohibiting such activity by such parties within the limits of our small community. The law suit placed squarely in issue for the first time the characterization of the ATM as to whether or not it was to be regarded as a branch. The Federal District Court in Rochester ruled in our favor the following year. This ruling was appealed by Marine Midland to the Second Circuit Court of Appeals in New York. A three Judge Circuit Court of Appeals reversed holding that an ATM owned by a third party, not a bank, here Wegmans, and shared by other financial institutions on a transaction fee basis was not to be regarded as a branch for purposes of local or federal law. The issue became a matter of interstate consequence so that with the financial assistance of the Independent Bankers of America, the Bank appealed the reversal in the Circuit Court of Appeals to the Supreme Court of the United States. After a year and much delay, the Supreme Court finally in April of 1986 ruled that it would not hear the case with the result that the Circuit Court ruling would stand. With that ruling ATM’s were, in effect, characterized as nothing more than a public telephone booth. Accordingly, the Bank completed its contingency agreements with the Cashere Network to link its ATM’s with those of the network which before the close of that year would include thousands of locations served by the Wegman Markets and New York Cash Exchange and Cashere networks. Now, the Bank’s customers could be serviced through the medium of plastic cards and electronics even as they traveled beyond our traditional marketplace.

By the end of 1983, if it were not already evident, there was strong evidence that a revolution was underway in the banking industry which would transform it and the financial services industry for all time. The recession and economic malaise that followed was going to strain the traditional fabric of the banking industry. Deregulation implied greater competition which, in turn, implied expanded powers and services which called for new regulatory structures. Though inflation had been bridled down to the 6% level by the end of 1983, it had been accomplished at a terrible cost of the recession. The next year or two would see a rapid increase in loan losses as the casualties of the economic collapse were buried. Likewise, bank failures would be common everyday occurrences seen before only during the early thirties. One of the largest banks in the nation, Continental Illinois of Chicago, would ultimately be saved from failure by the intercession of the Federal Deposit Insurance Corporation (FDIC) in May of 1984. So, too, the Bank had its own loan losses to absorb as old customers of the Bank who had been good for years just could not survive and the frailty and the inherent weakness of the so-called "character loan" were to take their toll. Fortunately, the basic earnings of the Bank were strong and these difficulties were weathered in due course.

By the end of 1984 the assets of the Bank stood at $173 million, more than double the footings of just five years earlier. Two more branches had been added, a totally different deposit structure established with the largest category of deposit being a money market account paying a market rate adjusted weekly with limited transaction authority and a host of other deregulated products which had transformed the business of banking into a highly competitive and technological undertaking. Net interest margins now had to be managed daily and large commercial credits monitored carefully. As the Bank had grown in market so had the staff doubled in number so that by the beginning of 1985 its internal organization had to be restructured whereby there would be in charge of each major function a Vice President who was to be responsible for its planning and implementation.

Thus, by 1984 George Gilbert had resigned from the Holcomb office after many decades of service. George Urstadt had retired as a Director with some 28 years of service to the Bank. Other changes in the directorate would occur with Dick Woolley leaving the Board and Jack VanBrooker, a long time merchant and grocer in the community would resign. But others came to replace them to include Tarry Croucher Shipley who was elected to the Board January of 1984 and was the first woman Director of the Bank. She was followed a year later by Alan Stone, Chairman of Stone Construction Company, Honeoye, and the Honorable Patricia Boland, former Mayor of the City of Canandaigua.

So it also was for the corporate structure of the Bank. The formation of a single bank holding company was approved in July of 1984 with many purposes in mind, among them: the avoidance of unfriendly takeovers which were then commonplace and the positioning of the organization to take advantage of expanded powers opportunities through separate subsidiaries as legislation should evolve and permit.

Accordingly, at the annual January meeting of the shareholders in 1985 the reorganization of the Bank into the Canandaigua National Corporation, itself owning 100% of the outstanding stock of The Canandaigua National Bank was approved. At the same time a 100% stock dividend was declared. As a result, there were now 80,000 shares of Canandaigua National Corporation outstanding. To implement this, stockholders surrendered their stock in the Bank and received two shares of the Holding Company for each share of Bank Stock. Each share of the original Bank Stock transcribed for in 1887 had now become 61-1/2 shares of Canandaigua National Corporation.

Although a number of younger people had been hired as loan officers, it became evident that the senior management was overburdened and was having difficulty in keeping abreast of the much increased loan demand, especially as related to larger, more complex commercial loans for which the demand continued to grow. As it happened, the mergers of Security Trust into Norstar Bank and Lincoln First of Rochester into Chase Manhattan were implemented throughout 1984 reflective, in general, of the trends toward conglomerization which had started as early as 1972. In that year there were 287 banks in New York State. By a decade later there were half as many headquarters of banks or bank holding companies. During this process a number of very qualified, experienced banking officers were set adrift in the confusion of the reorganizations and consolidations which inevitably occur during such mergers. Robert G. Sheridan, Cashier of the Bank since 1977, had far and away the largest portfolio of any officer in the Bank. He and the President were the principal commercial lenders at the time. In order to manage the present growth and have an opportunity to deal with the opportunities of the future, they actively began to recruit additional senior lending staff. James Minges, Vice President - Commercial Loans joined the Bank in late 1984 which enabled the Bank to start on the reorganization and development of a modern credit apparatus. He was followed by a year by his former associate, Wesley Talbett, who joined the Bank as a senior commercial lending officer in late 1985. None of this was too soon in the view of the retirement of Robert Craven in early 1986 with 38 years of devoted service to the Bank as commercial lender and personnel officer. His wisdom and lending experience served the Bank very well throughout.

Since the beginning of 1985 the reorganization and staffing of the Bank has built upon the firm foundations and basic principals which have served the institution so well over the years. Robert J. Craugh as Operations Officer has seen the Bank and this community develop over a 40 year span. His able guidance and experience has been of immeasurable value. The investments of the Bank are shepherded by Greg MacKay, who, ably trained and experienced, has mastered the changing financial markets. Richard Hawks has undertaken the management of the trust and fiduciary functions of the Bank to include their investments providing a sensitive nature and a skilled hand to the task. Theodore Smythe has transformed the traditional roles of Auditor to accommodate the changing world of electronic technology and skillfully tending to the security of our audit systems.

Clearly the mechanisms of the Bank have been transformed in this decade from one era to another in and on most every level. What remains the same however, is the intermediary function and financial service function which we provide our customers and which continues to be the focus for the present and the challenge for the future.

As we plan to celebrate the centennial of the Bank and even as this goes to print we continue to meet the challenges of the future by acting in the present. The renovation of the former Rochester Telephone building acquired in late 1985 and which has been the home of our computer department since that time will be complete by the end of 1986 and will be the new home of our consolidated operations. Connected by a pedestrian bridge to the Main Office at the second floor level, it provides a sensible allocation of space between retail customer service on the one hand and operational efficiencies on the other. Additional space will accommodate expanded customer services such as our newly issued VISA card, and indirect loan program, and other services. Strong earnings of the years, together with a conservative dividend policy, have provided the Bank with the growth in capital funds to keep pace with the gain in deposits. Total assets have passed $200 million. Dividends to stockholders have been increased modestly in each of the last 20 years. While some of the immediate competition in Rochester has been taken over by much larger holding companies, the management of The Canandaigua National continues to believe that the communities in which it operates are better and more efficiently served by an organization of moderate size under local control than by an enormous financial conglomerate.

As the problems for the past recession subside, and the opportunities for expanded powers and deregulation develop, the celebration of the centennial year finds an organization that is financially sound, a staff which is able and resourceful, in a marketplace which promises growth through the end of the century. This serves as a testament to those basic precepts which the Shareholders, Directors, Officers and Employees of this institution may take great pride in now as in the years to come as we move forward into yet another century of a successful enterprise dedicated to providing the best possible financial service to our customers and community alike.